Agreements Key to Maintaining and
Enhancing U.S. Economic Competitiveness

Washington, DC ­- In
testimony today before the Senate Foreign Relations Committee, National Foreign
Trade Council (NFTC) President Bill Reinsch urged Members of Congress to swiftly
ratify Tax Protocols with Germany, Finland and Denmark, and the Tax Treaty and
Protocol with Belgium. During his remarks, Reinsch stated:

“As global competition grows ever more
intense, it is vital to the health of U.S. enterprises and to their continuing
ability to contribute to the U.S. economy that they be free from excessive
foreign taxes or double taxation and impediments to the flow of capital that can
serve as barriers to full participation in the international marketplace.”

With regard to the protocols under
consideration, Reinsch noted that they “improve a convention that has stimulated
increased investment, greater transparency, and a stronger economic relationship
between our countries.” Reinsch detailed the many benefits of the tax protocols,
including provisions allowing for the elimination of the withholding tax on
cross-border dividends and enhanced tax treaty arbitration processes, among
others.

“If U.S. businesses are going to maintain a
competitive position around the world, we need a treaty policy that protects
them from multiple or excessive levels of foreign tax on cross-border
investments, particularly if their competitors already enjoy that advantage,”
said Reinsch.

The NFTC has long been an advocate for the
expansion and strengthening of the U.S. tax treaty network as a means to ensure
the continued global competitiveness of U.S. companies. By providing the
framework for international consensus on important issues like the
undesirability of double taxation or the need for reform on dispute settlement
procedures, these treaties are the building blocks for increased bilateral trade
and investment opportunities.

Outlining the consequences of not ratifying
pending protocols, Reinsch noted, “If U.S. enterprises cannot enjoy the reduced
foreign withholding rates offered by a tax treaty, noncreditable high levels of
foreign withholding tax leave them at a competitive disadvantage relative to
traders and investors from other countries that do enjoy the treaty benefits of
reduced withholding taxes.”

Reinsch urged Members to reject opposition
to single provisions included in the pending agreements, and to instead evaluate
the proposals on the basis of their overall intended effect.

“No process that is as laden with competing
considerations as the negotiation of a full-scale tax treaty between sovereign
states will be able to produce an agreement that will completely satisfy every
possible constituency, and no such result should be expected…Agreements should
be judged on whether they encourage international flows of trade and investment
between the United States and the other country,” he stated.